Co-ownership - Resolving disagreements between co-owners (sections 14 and 15 of Trusts of Land and Appointment of Trustees Act 1996)

Learning Outcomes

This article examines the legal framework provided by sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996 (TLATA 1996) for resolving disagreements concerning co-owned land. Upon completion of this article, you will understand the circumstances under which an application can be made to the court regarding a trust of land, the scope of the court's powers under section 14, and the specific factors the court must consider under section 15 when determining such applications, including the different approach taken when a trustee in bankruptcy applies. This will equip you to analyse SQE1 scenarios involving co-ownership disputes.

SQE1 Syllabus

For SQE1, you are required to understand how disagreements between co-owners of land are resolved through the statutory mechanisms provided by TLATA 1996. Focus your revision on:

• The circumstances giving rise to an application to the court under section 14 TLATA 1996.
• Identifying the parties who are entitled to make an application under section 14.
• The types of orders the court is empowered to make under section 14.
• The specific factors outlined in section 15 TLATA 1996 that the court must consider when exercising its powers under section 14 in non-bankruptcy cases.
• The distinct statutory factors under section 335A Insolvency Act 1986 that apply when the application under section 14 TLATA 1996 is made by a trustee in bankruptcy.
• Applying these statutory criteria to determine the likely outcome in specific factual scenarios involving co-ownership disputes.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Under s 14 TOLATA 1996, which of the following can apply to the court for an order relating to trust land?
   1. A trustee of the land only.
   2. A beneficiary of the trust only.
   3. Any person with an interest in the property subject to the trust, including trustees and beneficiaries.
   4. Only a person currently occupying the land.
2. When determining an application under s 14 TOLATA 1996 (not made by a trustee in bankruptcy), which of the following is NOT a factor explicitly listed in s 15(1)?
   1. The intentions of the settlor(s).
   2. The financial needs of the beneficiaries.
   3. The welfare of any occupying minor.
   4. The interests of any secured creditor.
3. A trustee in bankruptcy applies for an order for sale of a bankrupt co-owner's family home one month after the bankruptcy order. Which legislation primarily guides the court's decision?
   1. Section 15 TOLATA 1996 only.
   2. Section 14 TOLATA 1996 only.
   3. Section 335A Insolvency Act 1986.
   4. The Family Law Act 1996.

Introduction

Where land is owned by more than one person concurrently, a trust of land automatically arises under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996). While co-ownership allows shared enjoyment and benefit, disagreements inevitably arise. Co-owners might dispute whether the property should be sold, how it should be used, or who should occupy it. TOLATA 1996 provides a key statutory mechanism for resolving these disputes through court intervention, primarily via sections 14 and 15. Understanding the scope of these sections and the factors guiding the court's discretion is essential for advising clients in co-ownership scenarios.

Applying to the Court under Section 14 TOLATA 1996

Section 14 TOLATA 1996 empowers the court to make orders regarding land held under a trust. This provides an important route for resolving deadlock or disagreement between interested parties.

Key Term: Trust of Land
Under TOLATA 1996, any trust property that includes land is a trust of land. This automatically includes all forms of co-ownership (joint tenancies and tenancies in common).

Who Can Make an Application?

An application to the court under section 14 can be brought by any trustee of land or any person who has an interest in the property subject to the trust.

Key Term: Person with an interest in property subject to a trust of land
This encompasses trustees, legal and equitable owners (beneficiaries), those holding security over a beneficial interest (e.g., mortgagees), and the trustee in bankruptcy of a beneficiary whose interest has vested in them. It does not include unsecured creditors or persons with merely personal rights (like contractual licensees).

Scope of the Court's Powers

Section 14 grants the court a wide discretion. It may make any order it thinks fit concerning:

1. The exercise by the trustees of any of their functions. This includes powers relating to sale, leasing, mortgaging, partitioning the land, or deciding who can occupy the property.
2. Declaring the nature or extent of a person's interest in the property. This is particularly relevant where the shares under a tenancy in common are disputed, or where an interest under a constructive or resulting trust is claimed.

The most common application under section 14 is for an order compelling the trustees to sell the property when one co-owner wishes to realise their investment and another resists the sale.

Worked Example 1.1

Fatima and Gary own their home, "The Willows," as tenants in common in equity, with Fatima holding 60% and Gary 40%. Their relationship ends, and Fatima moves out. Gary continues to live at The Willows. Fatima wants the property sold so she can access her capital. Gary refuses, wanting to stay there. Can Fatima apply for an order for sale?

Answer:
Yes. Fatima, as a person with an interest in property subject to a trust of land (an equitable tenant in common), can apply to the court under s 14 TOLATA 1996. She can request an order directing the trustees (Fatima and Gary) to exercise their function of selling the property. The court will then determine the application based on the factors in s 15.

Determining Applications under Section 15 TOLATA 1996

When an application is made under section 14 (and it is not made by a trustee in bankruptcy), the court's decision is guided by the factors set out in section 15 TOLATA 1996. The court must consider these factors to achieve a fair balance between the competing interests.

The Section 15 Factors

Section 15(1) requires the court to have regard to:

• (a) The intentions of the person or persons (if any) who created the trust: Why was the trust established? Was it intended as a family home, an investment, or for another purpose? Evidence might be found in a trust deed, conveyance, or inferred from the circumstances at the time of acquisition.
• (b) The purposes for which the property subject to the trust is held: What is the current purpose of the trust? Has the original purpose ended (e.g., a family home for a couple whose relationship has broken down - Jones v Challenger) or does it continue (e.g., providing a home for remaining children - Re Evers’ Trust)? The court considers the purpose at the time of the application.
• (c) The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home: The needs of children residing in the property are a significant consideration. A sale might be postponed if it would cause undue hardship to minors, although the weight given to this factor may decrease as the children get older.
• (d) The interests of any secured creditor of any beneficiary: If a beneficiary has charged their equitable interest (e.g., taken out a mortgage secured against their share), the lender's desire to recover their debt is a relevant factor. Case law indicates that the interests of secured creditors often weigh heavily in the balance, potentially prevailing over the continuation of a family home unless circumstances are exceptional (Bank of Ireland Home Mortgages Ltd v Bell).

Key Term: Section 15 Factors
The specific criteria listed in s 15(1) and s 15(3) TOLATA 1996 that a court must consider when determining an application under s 14 (excluding applications by a trustee in bankruptcy).

Section 15(3) also requires the court to have regard to the circumstances and wishes of the beneficiaries of full age who are entitled to an interest in possession (or the majority according to the value of their shares if disputed).

The Balancing Exercise

TOLATA 1996 does not assign specific weight to any single factor. The court must weigh all relevant factors in the context of the specific case. The outcome is therefore highly fact-dependent. The court might order an immediate sale, postpone the sale (perhaps until children finish education), refuse a sale, or make other orders regulating occupation or buyout options.

Worked Example 1.2

Henry and Wendy bought a house together in 2015 as joint tenants in law and equity to be their family home. They have two children, aged 8 and 12. Henry took out a loan secured against his beneficial interest to fund a business venture, which failed. The lender, Secure Loans Ltd, obtained a charging order and now applies under s 14 TOLATA for an order for sale. Wendy opposes the sale, wanting to keep the family home for the children.

What factors will the court consider under s 15?

Answer:
The court must consider the s 15 factors:
(a) Intentions: To provide a family home.
(b) Purpose: The purpose continues as a family home for Wendy and the children.
(c) Welfare of minors: The children's welfare (aged 8 and 12) is a primary consideration, potentially favouring postponement.
(d) Interests of secured creditor: Secure Loans Ltd has a valid charge and a strong interest in realising its security. Creditor interests are often given substantial weight.
(e) Wishes of beneficiaries: Wendy wishes to remain; Henry's wishes may be less relevant given the debt.
The court will balance the need to protect the family home for the children against the legitimate claims of the creditor. While postponement is possible, case law suggests creditor interests are often prioritized unless exceptional circumstances exist.

Applications by a Trustee in Bankruptcy

The situation changes significantly if one of the co-owners is declared bankrupt. Their beneficial interest in the property vests automatically in their Trustee in Bankruptcy (TiB).

Key Term: Trustee in Bankruptcy (TiB)
An individual appointed to administer the assets of a bankrupt person for the benefit of their creditors.

If the TiB applies to the court under section 14 TOLATA 1996 for an order for sale (which is common, as the TiB needs to realise assets for creditors), section 15 TOLATA does not apply. Instead, the court must consider the factors set out in section 335A of the Insolvency Act 1986.

Section 335A Insolvency Act 1986 Factors

The court must consider:

• The interests of the bankrupt's creditors.
• Where the application concerns a dwelling house which is/was home to the bankrupt and their spouse/civil partner (or former spouse/civil partner):
  • The conduct of the spouse/partner regarding the bankruptcy.
  • Their needs and financial resources.
  • The needs of any children.
• All the circumstances of the case other than the needs of the bankrupt.

The One-Year Rule

Crucially, section 335A(3) states that if the application is made more than one year after the bankruptcy, the court must assume that the interests of the creditors are assumed predominant after one year, unless the circumstances of the case are exceptional.

This means that after one year, an order for sale is almost automatic, barring exceptional circumstances.

Key Term: Exceptional Circumstances (Insolvency Act 1986)
This term is interpreted narrowly by the courts. It means circumstances beyond the normal hardship associated with bankruptcy and eviction (e.g., severe illness of an occupant requiring stability in the home, significant disability adaptations to the property). Disruption to children's education or difficulty finding alternative housing are generally not considered exceptional (Re Citro).

Exam Warning

A common mistake is to apply the section 15 TOLATA factors when an application under section 14 is made by a Trustee in Bankruptcy. Remember that section 335A Insolvency Act 1986 provides the specific, and different, criteria for these situations, particularly the critical one-year rule favouring creditors.

Worked Example 1.3

Ian and Jane co-own their home. Ian was declared bankrupt on 1 March 2022. On 1 May 2023 (over a year later), Ian's TiB applies for an order for sale. Jane has a serious long-term illness and requires constant care at home, which Ian provides. Moving would severely disrupt her care regime and negatively impact her health. Are these circumstances likely to be considered exceptional under s 335A?

Answer:
Possibly. While the interests of the creditors are assumed predominant after one year, Jane's serious illness and need for care at home might constitute exceptional circumstances (Re Raval, Re Bremner). The court would need detailed medical evidence. If deemed exceptional, the court would still perform a balancing exercise, considering the creditors' interests alongside Jane's health needs, but a postponement of sale becomes a realistic possibility, unlike in typical cases after the one-year mark.

Summary

Resolving Co-ownership Disputes: TOLATA 1996 & Insolvency Act 1986

Key Point Checklist

This article has covered the following key knowledge points:

• Section 14 TOLATA 1996 allows trustees or those with an interest in trust land to apply to the court for orders regarding the trust.
• The court under s 14 can make orders about trustee functions (like sale) or declare parties' interests.
• For non-bankruptcy applications, the court must consider the s 15 TOLATA 1996 factors: intentions, purposes, minors' welfare, secured creditors' interests, and beneficiaries' wishes.
• The s 15 factors require a balancing exercise; no single factor dictates the outcome.
• When a Trustee in Bankruptcy applies under s 14 TOLATA, the court uses the factors in s 335A Insolvency Act 1986.
• Under s 335A, if the application is made more than one year after bankruptcy, creditors' interests outweigh all other considerations unless circumstances are exceptional.
• 'Exceptional circumstances' under s 335A are narrowly defined and relate to situations beyond the usual hardship of bankruptcy.

Key Terms and Concepts

• Trust of Land
• Person with an interest in property subject to a trust of land
• Section 15 Factors
• Trustee in Bankruptcy (TiB)
• Exceptional Circumstances (Insolvency Act 1986)